Auditor Details Waste and Abuse in Great Park Development

ByADAM ELMAHREK |January 15, 2014

When a forensic auditor attempted last year to speak with Marsha Burgess, the former Great Park employee who approved invoices for Forde & Mollrich, the park’s $100,000 per-month public relations consultant, she flatly refused.

“Nothing good can come from me talking to you,” Burgess told the auditor.

Nothing good just about sums up Tuesday night’s public presentation of a forensic audit of the park’s contracts by Hagen, Streiff, Newton & Oshiro Accountants at the Irvine City Council’s regular meeting.

Chris Money, one of the firm’s auditors, provided a sharply worded, two-hour history of Great Park contracts that suggested gross mismanagement of tens of millions of taxpayer dollars over the better part of decade on one of the county’s largest public works projects.

In a PowerPoint presentation that included 100 slides, Money showed how city leaders awarded millions in sole-source contracts with little to no accountability to a roster of consultants, who were closely tied to park CEO Mike Ellzey and Councilman Larry Agran.

Among the audit’s findings:

On many occasions the city paid consultants twice for the same work.

A design consultant was paid for feasibility studies that were incomplete and even plagiarized.

The city awarded a $10-million consulting contract practically “over the phone.”

The city paid one consultant a $12,000 change order to alter just one word in a groundwater report.

By the end of the presentation, Mayor Steven Choi took a moment to compose himself. At one point, he said he felt “betrayed” by city staff and consultants, several of whom retained lawyers and refused to speak with the auditors.

Agran slammed the audit for not including what has been built at the park. He went through his own slideshow, a catalogue of pictures that included bright-green soccer fields, a reflecting pool and children playing with oversize chess pieces.

The audit results are only preliminary, because several consultants and Burgess refused to speak with the auditor.

Money also spoke of an off-the-record “common theme” told to auditors by city employees, who declined to go on the record for the audit. No council member asked what that theme could be.

Money called on the council to use its powers — possibly subpoenas — to compel the consultants and others who refused to speak to go on the record so the audit can assess for the record “the significance of everything.”

Money pointed to a design contract with a company called Great Park Design Studio, which wound up with 50 change orders, as “example No. 1 of an improper selection” through sole-source contracting.

The change orders caused the contract with the Design Studio, a joint venture between master designer Ken Smith and the Great Park’s project management firm, Gafcon, to jump by $15.4 million to a total of $43 million, a spike of more than 56 percent, according to Money’s presentation.

Other consultants said Design Studio should have been paid no more than $18 million to $20 million, according to the presentation.

Money said the hiring of Design Studio was flawed from the beginning, because the City Council approved the firm’s selection before negotiating its contract, a move that “doesn’t make sense” because it gives up “significant negotiating power,” he said.

According to the audit, Ellzey became “increasingly dissatisfied” with Design Studio’s poor budget planning and substandard work. One set of feasibility studies was so shoddy — with parts that were even plagiarized — that city staff had an “all-night pizza party” to fix the reports so they could be presented publicly, Money said.

In other instances, documentation of invoices was so lacking — some simply missing — that it was impossible to tell whether they deserved payment, Money said. To solve this problem, the park staff softened the requirements.

Here is how Money described the park staff’s approach: “I have an idea — let’s just ignore it.”

Ultimately, the Design Studio contract was terminated early but not before the firm collected $35.5 million.

That wasn’t the only contract with excessive change orders. The contract to build the so-called Preview Park, which includes the iconic orange balloon, jumped from over $1 million to over $7 million, five times the original amount.

In determining the need for a sole-source contract, the city at times declared that a “sole-source condition” existed. However, the city had no definition of a “sole-source condition.”

“We feel that this results in a lot of abuse in awarding contracts to people that the city wants to award contracts to,” Money said. “It inhibits competitive bidding, which theoretically lowers the city’s cost for construction contracts and public works.”

Questionable Methods for Choosing Consultants

Money also took issue with how some consultants, such as WRNS Studio and Strada Investment Group, were chosen. Ellzey picked some because of his past working relationships with them in San Francisco, Money said.

If a city leader had an idea of contracting with a consultant, that business would at first get a small job with responsibilities that would gradually expand, according to Money. As in the case of San Diego-based Gafcon, the firm wasn’t vetted at all before it was chosen, the audit shows.

“Their function gets bigger and bigger and bigger until the end of the day they’re one of the chiefs running the Indians, rather than one of the Indians,” Money said.

Some handsomely paid consultants were also generous financiers of the election campaigns that helped Agran and the rest of the council’s former Democratic council majority.

Contributors include Design Studio partners Smith and Gafcon as well as Forde & Mollrich, which for years kept its public relations subcontract under a design contract that couldn’t be obtained by the public.

Forde & Mollrich was paid $7.2 million between 2005 and 2012, according to the audit. The auditors did not look into what Forde & Mollrich did for that money, because it was outside the audit’s scope, Money said.

Consultants Fight Back

In a statement circulated last week, Forde & Mollrich slammed the audit as a political scheme by the current Republican council majority to boost its political fortunes by trampling on the reputation of the park.

“This so-called ‘performance review’ is an attempt to rewrite history to conform to the political agenda of the current Council majority by tearing down the reputations of those who dared to believe that an abandoned military base could become the first great metropolitan park of the twenty first century,” Forde & Mollrich’s statement asserted.

The firm and other consultants have insisted they would cooperate but demanded questions in writing. Money said doing so would be expensive, time-consuming and would allow for orchestrated responses that would stymie efforts to corroborate facts.

The audit was commissioned by the current Republican council majority a year after unseating the Democratic council majority that had for years controlled the city administration and the Orange County Great Park Corp.

The Great Park, first approved by county voters in 2002 as an alternative to transforming a shuttered military air base into an international airport, was envisioned to compare with the likes of New York’s Central Park. But construction of the park stalled for years, and it became a symbol for waste and abuse in large public works projects.

City Leaders Defend Themselves

Members of the Democratic council minority and Ellzey defended their accomplishments at the park, pointing to what’s already been built and alleging that the audit presented facts out of context and in some cases inaccurately.

“If I didn’t know any better, it would be pretty easy to feel like a complete failure,” Ellzey told the council. “But I do know better.”

The auditor alleged that some feasibility studies were performed twice, first by Design Studio and then later by WRNS. Ellzey said this was false; the studies fell under two different categories – level 1 and level 2 – and he also noted that the amounts listed in the audit were inaccurate.

Ellzey also said that some conclusions of the audit were never presented to him, such as the alleged hiring of Brendan McDevitt, Ellzey’s pick to assist the program manager in a way that wouldn’t be subject to political pressure, since the hiring had been concealed from elected officials.

And the cronyism that is suggested simply doesn’t existy, Ellzey said. McDevitt isn’t his friend, Ellzey insisted; he was somebody Ellzey knew and was capable for the job.

“I never once had a social interaction with any of these people brought onto these projects,” Ellzey said. “There is nothing inherently negative I have experienced, even here, with sole-source contracts.”

Agran insisted that change orders weren’t so bad, because they showed a leadership willing to seize opportunities.

“I believe ultimately here’s an agenda here where everybody is throwing everybody under the bus,” said Democratic Councilwoman Beth Krom.

Krom said that facts were presented out of context and that there was more to the story than just change orders. She said that negotiating with a design firm after it has already been selected is how an international design contest process works.

“At the end of the day, there’s been a lot of vision that’s been employed, and vision isn’t something that is easily quantified,” Krom said.

The council voted 3-2 to ask the auditor to bring back a new scope of work that would address the many questions raised by the audit, such as the magnitude of the double billings.

It is unclear whether the council will use its powers to force people into speaking. Republican Councilman Jeffrey Lalloway in an interview before Tuesday said he was still considering the options.

But Lalloway supported continuing an investigation into what happened at the park.

“What’s astonishing to me, in this day in age with everything we have and everything we know, with open-government laws, that people think they wouldn’t get caught,” Lalloway said. “I think we owe it to the citizens of this county to get to the bottom of what happened. This is part way there.”

ByADAM ELMAHREK |March 16, 2012

ByADAM ELMAHREK |January 9, 2012

Irvine’s redevelopment agency — the primary means of funding
construction of the Great Park — could disappear because of a state
Supreme Court decision. Great Park leaders have yet to devise solid
alternatives.